Cell phone bills fell 50% in last ten years

The government has concluded that the average cell phone bill today is only …

The big get bigger. A new report on the cell phone industry (PDF) from the Government Accountability Office (GAO) opens with the line, "The biggest changes in the wireless industry since 2000 have been consolidation among wireless carriers and increased use of wireless services by consumers." Both parts of that sentence are significant; though only four players dominate 90 percent of the US wireless market, consumers have seen serious benefits over the last decade.

Even as the industry consolidated, making it "more difficult for small and regional carriers to be competitive," prices dropped and coverage rose. It might not feel like that when you pay your wireless bill, but the GAO concludes that (when inflation is factored into the equation) 2008 prices were only half of what they had been in 1999.

Still, critics focused on the consolidation of the market, calling it a long-term risk. “These trends do not bode well for consumers, despite any benefits of the moment," said Public Knowledge's Gigi Sohn, who then called for wireless net neutrality, text messaging regulation, an end to handset exclusivity, and more reasonable early termination fees.

While consolidation is real, no company has more than a third of the market. (Compare this to Google's staggering domination of the search market.) Still, industry practices involving handset exclusivity and early termination fees may keep consumers out of the market during the course of two-year contracts, and this may have some anti-consumer effects such as "anticompetitive switching costs."

But wireless carriers have their own problems, including zoning. Putting up new towers can be difficult, expensive, and time-consuming, depending on where one wants to build. "Many stakeholders with whom we spoke said that in California, for example, there continues to be significant public concern over the aesthetic and health impacts of wireless infrastructure," says the report. "As a result, locating wireless facilities can be challenging in cities such as San Diego and San Francisco."

Should be receiving our household's first cell phone in mail tomorrow. It took this long for there to be a deal that I figured was worth it. Prepaid 5¢ minute voice, 2¢ a text, and 10¢ meg for data. The wackiness of contracts and obfuscated plans kept us away, as well as price.

This must only be true of people that don't have smartphones... 10 years ago, my bill was $68 for two lines, where each phone was a standard no-frills phone. Today it is $160 for two lines, where each phone is a 3G smartphone.

That 50% decrease sounds cool, but is meaningless. We also need to find out the wholesale costs of hand sets and factor in, that going from analog to digital transmission uses bandwidth better and plays into Moore's Law.

but the GAO concludes that (when inflation is factored into the equation) 2008 prices were only half of what they had been in 1999

No, not quite. Or has inflation increased 50% in the last 10 or so years? From page 24 of the report:

Quote:

The Consumer Price Index, which shows the changes in the average pricesof goods and services, indicates that the overall average price (adjusted forinflation) for wireless services declined each year from 1999 to 2008 (seefigure 11); the average price for wireless service in 2009 wasapproximately 50 percent of the price in 1999. This illustrates thatconsumers are generally getting more wireless services (such as morevoice minutes of use) for lower costs than they were 10 years ago.33

The CPI is only one metric. And "average price" is undefined. In 1999, we had cellphones with limited minutes, not data devices with unlimited data (but, still, limited minutes), so the comparison seems slightly skewed to begin with.

One interpretation is that if I had the exact same plan today that I had in 1999, that my cost would have fallen by 50%, and I suppose that's possible. But mobile companies don't let that happen for too long. In 1999, I had to replace the cell phone I bought in 1995 because Sprint no longer would provide updates for it. Meaning - new plan because they didn't offer the old plan any more. So users are eventually forced into higher-priced plans, even if the equipment continues to work.

My current plan (Sprint's cheapest Everything plan) costs more than twice as much as the original plan for, still, roughly the same amount of talk minutes.

I dunno. I spent quite a bit on my old plans for what little I got. I had a prepaid first and it cost way more than I had expected. Then a couple hundred voice minutes, unlimited 2G data, and a few hundred texts ran me $45. Next, it went up to $60 when I added 3G, unlimited text, more minutes, and discovered a 14% discount. Now I pay about $65 plus tax for my half of a shared plan that includes more (1500) minutes than I could possibly use (free calls to mobile, nights, weekends, etc. make it hard to use minutes), unlimited text, uncapped 3G, and access to my city's Wimax network as well as the ones in other cities I often visit.

For something I use every day which has replaced landline, PDA, mp3 player, and point-and-shoot, I don't find this too terrible. It also gives me internet connectivity on my laptop as well as the phone while I am away from home or work. This is great on the road. Obviously I would love it if they offered a cheaper plan with less minutes since I rarely call land lines before 7pm on weekdays. That said, it's not terrible and I could easily lower my bill if my income dropped and I couldn't afford relative luxuries like high-end phones or unlimited plans.

Oh yeah, tell that to my $120 a month iPhone bill. A lot to pay to pay GPS games, check my bank balance, facebook posts and read news while on the toilet

You chose to buy one of the most expensive phones on one of the most expensive carriers. What you do with your money is your business but isn't this a little like saying "I bought this Porsche and by god the gas, insurance, and maintenance are crazy expensive!"

Comparison shop. Figure out how much certain things are worth to you. If having these things you mention is worth $120 to you then you should be cool. If not, then why buy them?

This article is a great example of how creative journalism can cook numbers. 10 years ago, the economy was in much better shape, and here in 2010, most Americans are paying more for cellular service, including those without data plans.

Contrary to many of the comments above, I find this article makes quite a bit of sense. In early 2000, I was paying $140/month for 1,400 minutes. Nights and weekends didn't exist yet, so it was 1,400 total minutes. This on a monochrome Nokia, no texting or data, of course. Now, I pay $85/month for unlimited calling, SMS, MMS and data on a BlackBerry that I can tether to my netbook in a pinch. So that's a 39.3% reduction in absolute dollars before factoring in the significant change in services offered, lack of overages and inflation. If I didn't want unlimited everything and didn't care about data, last I checked I could get 1,200 minutes and 500 texts for $45/month (my fiancee's prepaid plan is also $45 and includes unlimited calling, SMS and MMS -- not to mention, no taxes), and that would have free nights and weekends, so the closest apples-to-apples to my mind would be a 67.9% reduction in absolute dollars -- then adjust for inflation and it's even more.

It might feel true if I used every minute of voice and ignored data fees. I'm sure it literally is true (we do get a lot of minutes for the same or less cost). I remember paying something like $0.46 a minute to use my Motorola brick-phone. But I never used a lot of voice minutes and data cost is killing me today.

If nothing else, this seems to generalize users too much. Anyone who has upgraded from a standard phone to a smartphone has had their bills go up. Granted, the phone does a lot more, but (and I could be totally wrong on this), if enough of those people represent a shift in what the norm is (crappy phones to smartphones), then, at least for 100% of them, their bills went up significantly. At the very least, any analysis should reflect that, rather than just lumping everyone together with "well... shitty phones that cost less than nothing to replace and do nothing but make phone calls and texts have had their monthly cost go down, so that means cell phone service across the board is cheaper."

Personally, I haven't seen any decrease. I started out at like $55/month on T-mobile in like 2004. On to Cingular/AT&T in 2005 for about the same (maybe like $50), switch to iPhone 2G in 2007 making it around $70-75, then to 3G in 2008 making it $85+. Now going to T-Mobile again for the Vibrant, and it's going up by like $5 (for texting, no less). Fuckers. If it costs Netflix $0.3 to stream a standard def movie, then text should be free, unless I'm attaching a DVD-quality video.

I use the hell out of smartphone features. It would hamper me to go back to a non-smartphone. My phone bill has not gone down, and is not going down any time soon.

If nothing else, this seems to generalize users too much. Anyone who has upgraded from a standard phone to a smartphone has had their bills go up.

Not necessarily. I was using a Qualcomm flip phone back in 2000 and was paying $35/month but upgraded to a Touch Pro2 last year and am currently paying $27/month. Of course, you could argue whether or not a WinMo phone is a smartphone.

Not necessarily. I was using a Qualcomm flip phone back in 2000 and was paying $35/month but upgraded to a Touch Pro2 last year and am currently paying $27/month. Of course, you could argue whether or not a WinMo phone is a smartphone.

I wonder if they are talking about on a per minute basis? With the exception of the Analog to Digital changeover, the price of my voice service was relatively stable, but the number of minutes I got went up.

Back in 1994, my cell phone service was $100 for $100 minutes, for an analog phone. Then when I switched to a digital phone in 1996 or so, it was $39 for 180 minutes.

I remember when I switched phones a few years later, it was $34 for something like 500 minutes or something like that. When I switched to GSM, it was $39 for something like 750 or 1500 minutes (I forget which specific plan I had at the time)

Today, my voice service is still something close to $39, but now I also have to pay $30 for data, as well as another $20 for unlimited texts (covers both my lines), which I used to get for free on my older plans.

Oh ok. In my neck of the woods, the only thing that can touch that is Cricket Wireless, which is $45 for something similar. But they don't really have many smartphones to choose from at any of the stores around here, so your only option is to get an unlocked CDMA smartphone, which will just add to the cost... Plus the Android and Blackberry plans are $55 & $60.

It is still bullshit when compared to the rest of the world. In Bangkok I pay ~$12 for unlimited cell phone use (unlimited SMS,MMS too) with a major carrier. The same plan in the US was $50-60 with T-mobile.

Carriers here also give out free SIM cards and additional plans for being a good customer such as a SIM they gave my fiancee that was 1 baht (3 cents) per minute for international calls anywhere in the world. In the US they charge for every little minuscule of service. The service is amazing as they bend over backwards to help you in any manner for free.

Bully for you that you got that. That plan hasn't been offered since July 2008, and was supposedly only employee referral. Not available to the general public.

I guess it depends on your definition of available and general public. Wasn't hard to wander by a Sprint store to ask a rep for their email address. Or the harder route (if you wanted to keep your number) was to call up retentions and talk them into switching your plan. Anyone could do it. It was a matter of how much time it was going to take.

Even today, I keep reading reports of people cloning their plan and then TOLing it to other people. So in a sense, it's still available though quite a bit more difficult to get since you have to find someone willing to clone/TOL.

Even if only voice plans were halved, is this reflective of what it costs a carrier to provide such services? Somehow, I suspect that the costs have been more than halved over time with better infrastructure. Certainly, many costs such as customer service (which one would expect to be proportional to the amount of subscribers) would not drop, but other costs should drop.

I think that the costs of setting up the infrastructure and acquiring the needed spectrum may be initially high, but afterwards, the margins on providing the service with a subsidized phone (effectively a high interest loan) more than make up for it.

How else can one explain the rises in profits in telecoms? Look at the shareholder's reports - in Canada and the US, we are getting ripped off big time. What we really need is a model like Europe's where people buy their phones unlocked and then pay for service (which is cheaper due to competition), leading to lower long run costs. Alas, we are too short-sighted here in North America to demand better service for our cash and our debt culture makes us unwilling to invest in the true cost of goods such as mobile devices initially - all of which costs us the consumer.

Voice communication can use less than 9.6 kbps. If you use more data, it should be no surprise bills will go up. If you use a smaller cell phone company, like MetroPCS, you can get lower bills. A local cell phone company, like Pocket Wireless, offers unlimited calls in the San Antonio area for $25/month.

1. In 1999, cell phone use was still highly an "early adopter" and business user phenomenon. Consumers, by and large, did not have cell phones. The market for consumers was significantly larger than in 1995, and was growing rapidly, but nowhere near the market that it is today. All of which is to say that the nature of the cell phone market in 1999 was significantly different: people with money to burn had cell phones, and businesses. It was a luxury item.

2. Economies of scale also apply. Again, the cell phone market has grown significantly in the past decade. Thanks in large part to the consumer market, there are just significantly more handsets being sold, and the same number of cell towers cover far more users.

So, you have a change in type of user to a more mass-market user, and at the same time a change in density of user and economies of scale. Overall, I'm quite underwhelmed by the 50% average bill reduction.

This can be true because US cellphone rates in 1999 were already much higher than elsewhere in the world-- and they still are. The US cellphone market in 1999 was less developed than many other markets, even markets in much less developed countries.

Since when the heck do you count inflation in comparisons of this nature? Compared to the computing power provided, computers are much cheaper today than in 1999-- much more than 50% cheaper, I'd wager, and that's without counting inflation at all. Compared to that a 50% reduction after inflation is paltry.

This is a pointless comparison. Surely phone bills should fall given the technology get cheaper. This is like being surprised by the price of computers is falling. The real question is, has it fallen as much as it could or should?

E.g. most western countries have access to the same cell phone infrastructure technology, so more interesting would be to compare how prices have fallen across different countries since 1999. Only then can you know whether the quadropoly is hurting or not.

but the GAO concludes that (when inflation is factored into the equation) 2008 prices were only half of what they had been in 1999

No, not quite. Or has inflation increased 50% in the last 10 or so years? From page 24 of the report:

Quote:

The Consumer Price Index, which shows the changes in the average pricesof goods and services, indicates that the overall average price (adjusted forinflation) for wireless services declined each year from 1999 to 2008 (seefigure 11); the average price for wireless service in 2009 wasapproximately 50 percent of the price in 1999. This illustrates thatconsumers are generally getting more wireless services (such as morevoice minutes of use) for lower costs than they were 10 years ago.33

The CPI is only one metric. And "average price" is undefined. In 1999, we had cellphones with limited minutes, not data devices with unlimited data (but, still, limited minutes), so the comparison seems slightly skewed to begin with.

One interpretation is that if I had the exact same plan today that I had in 1999, that my cost would have fallen by 50%, and I suppose that's possible. But mobile companies don't let that happen for too long. In 1999, I had to replace the cell phone I bought in 1995 because Sprint no longer would provide updates for it. Meaning - new plan because they didn't offer the old plan any more. So users are eventually forced into higher-priced plans, even if the equipment continues to work.

My current plan (Sprint's cheapest Everything plan) costs more than twice as much as the original plan for, still, roughly the same amount of talk minutes.

But...on the Everything plan you are not just getting talk minutes. Sure your Sprint line to land lines is capped in number of minutes, but if you call other mobile phones (ANY mobile phone in the US) it's free. You get unlimited data...unlimited texts, etc...

Voice-wise, things have indeed improved over the past decade. You'd hope so, since voice is a mature market in mobile phones. Text messaging, the first exposure most people have to any sort of data service, is absurdly expensive on an individual basis. 5 cents a message to 20 cents a message in a decade is terrible, and even worse with inflation. Sure, bundles help a bit, but $20 a month for unlimited messaging with the largest carriers on an individual line is hardly a bargain. And then there's data services. Data service was in its infancy in 1999. It usually just ate out of your minutes but had a small monthly charge otherwise. Nowadays you can get quite fast speeds where usage does not deduct from your minutes (for some CDMA carriers this was the case even 5 years ago, like with Verizon) for ever-increasing minimum costs. And then there's the mandatory data packages for the ever more popular smartphones. You figure $30 per month for that from the big two. So voice-wise bills might have fallen over the past decade, but overall they've very likely increased by a not insignificant amount.

The next real change in mobile phone service is likely to come from prepaid. The postpaid contract market has been acknowledged to be saturated but prepaid is growing overall. Americans are finally coming around to the idea that prepaid can make sense and isn't just for those that almost never use their phones or with poor credit. Cricket and MetroPCS have long had unlimited regional plans for a relatively low cost per month, but now many national players are in it. Sprint has both their Boost Mobile and Virgin Mobile both have unlimited-everything plans for a bit less than the contract equivalents, with the caveat of decreased phone selection and coverage compared to contract service. And Virgin Mobile finally introduced what a lot of us folks that use data a lot but almost never talk on their phones wanted: cheap unlimited data and SMS with just enough minutes. I paid the ETF on my iPhone 3G S with AT&T to move to the Virgin Mobile BlackBerry 8530 and the $35 300 minute plan. I halved my monthly expenses and ditched the contract. Because I was on a family plan before, I effectively ended up with more minutes per month, too. More smartphones are coming to prepaid, too. Boost Mobile already has the Motorola i1 Android handset, although it is hobbled by slow iDEN data speeds, and Cricket is supposed to get the Kyocera/Sanyo Zio, another iDEN handset. It may take a few years for this to materialize, but eventually the largest national carriers will be forced to compete, which will finally bring data prices down to sane levels for most people.

Should be receiving our household's first cell phone in mail tomorrow. It took this long for there to be a deal that I figured was worth it. Prepaid 5¢ minute voice, 2¢ a text, and 10¢ meg for data. The wackiness of contracts and obfuscated plans kept us away, as well as price.

Could you please share where you got that deal? I'm always interested in a cheaper cell phone.

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I hope it falls another 50%. I won't consider signing another cell phone contract unless I can get unlimited everything for about $35-$40 a month.